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Corporate Taxation and the Choice of Patent Location within Multinational Firms

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  • Tom Karkinsky

    ()
    (Oxford University Centre for Business Taxation)

  • Nadine Riedel

    ()
    (Oxford University Centre for Business Taxation)

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    Abstract

    This paper investigates whether corporate taxation affects the location of patents within a multinational group. We exploit a unique dataset which links patent data from the European Patent Office to micro panel data on European firms for 1995-2003. Our results suggest that the host country’s corporate tax rate exerts a negative effect on the number of patents filed by a multinational subsidiary. The effect is statistically significant and quantitatively large and turns out to be robust against controlling for affiliate size. The findings prevail if we additionally account for royalty withholding taxes. Moreover, binding ‘Controlled Foreign Company’ rules tend to decrease the number of patent applications.

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    Bibliographic Info

    Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0914.

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    Date of creation: 2009
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    Handle: RePEc:btx:wpaper:0914

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    Keywords: corporate taxation; multinational enterprise; profit shifting;

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    1. Zingales, Luigi, 2000. "In Search of New Foundations," CEPR Discussion Papers 2551, C.E.P.R. Discussion Papers.
    2. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
    3. Bloom, Nick & Griffith, Rachel & Van Reenen, John, 2002. "Do R&D tax credits work? Evidence from a panel of countries 1979-1997," Journal of Public Economics, Elsevier, vol. 85(1), pages 1-31, July.
    4. Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2207-2223, September.
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    Cited by:
    1. Stefan Lutz, 2012. "Effects of taxation on European multi-nationals’ financing and profits," The School of Economics Discussion Paper Series 1214, Economics, The University of Manchester.
    2. Griffith, Rachel & Miller, Helen & O'Connell, Martin, 2011. "Corporate taxes and the location of intellectual property," CEPR Discussion Papers 8424, C.E.P.R. Discussion Papers.
    3. Lourdes Jerez Barroso, 2011. "Base imponible y neutralidad del Impuesto de Sociedades: alternativas y experiencias," Hacienda Pública Española, IEF, vol. 197(2), pages 113-146, June.
    4. Simon Loretz & Socrates Mokkas, 2011. "Evidence for profit shifting with tax sensitive capital stocks," Working Papers 1116, Oxford University Centre for Business Taxation.
    5. Tom Karkinsky & Nadine Riedel, 2009. "Corporate Taxation and the Choice of Patent Location within Multinational Firms," CESifo Working Paper Series 2879, CESifo Group Munich.
    6. Dischinger, Matthias & Riedel, Nadine, 2011. "Corporate taxes and the location of intangible assets within multinational firms," Journal of Public Economics, Elsevier, vol. 95(7), pages 691-707.
    7. Tom Karkinsky & Nadine Riedel, 2009. "Corporate Taxation and the Choice of Patent Location within Multinational Firms," Working Papers 0931, Oxford University Centre for Business Taxation.

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